What Does Wall Street Do?
There is a wide misconception of what Wall Street actually does.
The popular view is of sophisticated, intelligent money managers working on Wall Street. They see macro trends, can identify undervalued companies at will and make money on stocks going up and down.
Yet this view of ‘finance titans’ couldn’t be further from the truth. Ok yes, there is ‘smart money’ on Wall Street, making intelligent equity investments. But they’re the minority.
The vast majority are either consulting firms, banks, private equity or brokers, all making money on fees rather than intelligent stock selection.
Soon Out of the Job?
But these overpaid Wall Street bankers, brokers and consulting firms that perform monotonous tasks, might soon be out of the job.
Already, those who work on Wall Street are competing against machines which can do their jobs faster and at a fraction of the cost. As Bloomberg explains:
‘Wall Street is entering a new era. The fraternity of bond jockeys, derivatives mavens and stock pickers who’ve long personified the industry are giving way to algorithms, and soon, artificial intelligence.
‘Banks and investment funds have been tinkering for years, prompting anxiety for employees. Now, firms are rolling out machine-learning software to suggest bets, set prices and craft hedges. The tools will relieve staff of routine tasks and offer an edge to those who stay.
‘But one day, machines may not need much help. It’s no wonder most of the jobs Goldman Sachs Group Inc.’s securities business posted online in recent months were for tech talent. Billionaire trader Steven Cohen is experimenting with automating his top money managers. Venture capitalist Marc Andreessen has said 100,000 financial workers aren’t needed to keep money flowing.’
Jobs on Wall Street that already use machine learning include; traders, sales teams, portfolio construction, trade execution, analysts and modellers. And this is just the start.
There is an obvious opportunity here — invest in companies developing machine learning. Companies already far ahead in their artificial intelligence and machine learning programs include Alphabet Inc. [NASDAQ:GOOG], BAIDU Inc. [NASDAQ:BIDU] and International Business Machine Corp. [NYSE:IBM].
Who knows, by investing in companies that are putting Wall Street out of business, you could create a fortune in the process.
Junior Analyst, Money Morning
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